Retirement planning is often misunderstood by French nationals living in the United States.
Many believe the American system offers the same guarantees as in France: a stable income guaranteed by a mandatory scheme. However, the U.S. system is primarily based on individual capitalization, through retirement accounts opened by employees or employers. This structural difference has a significant impact on how retirement should be planned — especially for expatriates.
The U.S. public system: a partial foundation
The basic American system, known as Social Security, is funded by payrolltaxes (FICA) at 12.4% of income (half paid by the employer, half by the employee), up to a certain cap. But contrary to common belief, Social Security represents only a supplemental income. On average, it amounts to approximately $48,000 to $50,000 per year .
Benefits are calculated based on the 35 highest-earning years, and amounts varydepending on the duration and level of contributions. Expatriates may contribute as long as they work legally in the United States.
Source: https://www.ssa.gov/international/Agreement_Pamphlets/documents/France.pdf
2. The French model: solidarity and pay-as-you-go
In contrast, France relies on a pay-as-you-go system. Contributions from active workers directly finance retirees’ pensions. It includes:
- a basic scheme (CNAV),
- mandatory supplementary schemes (Agirc-Arrco, liberal professions, etc.).
This model guarantees a stable monthly income, independent of market performance, with calculations based on contribution duration or accumulated points.
3. Understanding private retirement vehicles in the United States
To offset the limitations of the public system, the United States offers a range of tax-advantaged private retirement plans:
- 401(k): employer-sponsored plan. Contributions deducted from gross salary, with employer matching in many cases.
- IRA (Individual Retirement Account): individually opened account, designed tocomplement the 401(k).
- Other vehicles: solo 401(k), SEP IRA, or Defined Benefit Plans (for high earners or executives).
These plans come in two main versions:
- Traditional: deductible contributions, taxable withdrawals.
- Roth: after-tax contributions, income tax-free withdrawals (under conditions).
The choice depends on the tax profile, place of residence, income level, and investment horizon.
Source: https://www.irs.gov/retirement-plans
4. New contribution limits for 2026 In 2026, contribution limits are changing:
- 401(k): $24,500/year + $8,000 (catch-up) starting at age 50, for a total of $32,500 for those over
- IRA: $7,500 + $1,000 starting at age 50.
- Super catch-up: possibility to add an additional $11,250 between ages 60 and 63 in certain cases.
Source: https://www.irs.gov/newsroom/401k-limit-increases-to-24500-for-2026-ira-limit-increases-to-7 500
5. Benefits for French nationals living in the United States When properly used, these plans offer several advantages:
- Immediate tax relief on taxable income (Traditional).
- Leverage through employer matching (typically 3 to 6% of salary).
- Tax-deferred growth as long as funds are not withdrawn.
- Diversification of retirement income sources (Roth vs. Traditional).
This makes them a central tool in a comprehensive wealth strategy.
6. Common mistakes to avoid
- Not contributing to your 401(k) → loss of employer matching.
- Leaving inactive plans unmanaged when changing employers.
- Making withdrawals before age 59.5 → 10% penalties except in special cases.
- Poor coordination of FR/US taxation → risk of double taxation.
According to Fidelity, nearly 30% of Americans make an early withdrawal during their working life, significantly reducing their future retirement capital.
Source: https://www.fidelity.com/learning-center/smart-money/i-need-my-401k-money-now
7. Franco-American strategy: optimization levers
a. France–United States tax treaty (Article 18)
This treaty helps prevent double taxation on retirement income. By complying with reporting requirements, a French tax resident is not taxed twice on withdrawals from a U.S. retirement plan.
Source: https://bofip.impots.gouv.fr/bofip/3063-PGP.html/identifiant%3DBOI-INT-CVB-USA-10-20200 219
b. Asset diversification
An effective strategy relies on complementarity between:
- 401(k) and IRA (U.S. capitalization),
- life insurance or PER (French capitalization),
- real estate, structured products, etc.
c. Maintaining U.S. accounts after returning to France
In most cases, it is recommended to retain U.S. plans in order to preserve accrued benefits (matching contributions, tax advantages, vested rights). Exceptions may apply for short-term expatriations or depending on estate planning objectives.
Source: https://sjb-global.com/401k-us-retirement-comprehensive-guide-for-living-abroad-in-france
d. Best management practice
- Start contributing early (even small amounts).
- Contribute at least up to the employer match threshold.
- Do not stop contributions during market downturns.
- Review annually: allocation, contribution rate, tax situation.
- Seek professional guidance to coordinate France/United States impacts.
Conclusion
For French nationals living in the United States, U.S. retirement plans (401(k), IRA) are essential pillars of a well-structured wealth strategy. However, their effectiveness depends on coordination between taxation, investments, and life objectives, in alignment withU.S. and French law.
A comprehensive approach can help make it possible to build a solid, tax-optimized retirement aligned with long-term family goals.
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This material is intended for general public use. By providing this content, Park Avenue Securities LLC and your financial representative are not undertaking to provide investment advice or make a recommendation for a specific individual or situation, or to otherwise act in a fiduciary capacity. Financial professionals do not provide tax or legal advice. Individuals should consult with a qualified tax professional regarding their specific tax situation.